Moneycontrol PRO
Upcoming Event:Experts and leaders discuss how modern digital tools are transforming the media industry. Register now

Technical View | Nifty forms Long Black day candle; further steep correction seen if index breaches 16,000-15,900 zone

The index has decisively broken its 200-day exponential moving average (which was placed at 16,881) and saw Long Black Day kind of pattern formation on the daily charts, indicating too much pessimism in the market.

February 24, 2022 / 05:30 PM IST

Invasion of Ukraine by Russia rattled equity markets on February 24 as the Nifty50 crashed nearly 5 percent, its biggest single-day fall since March 2020. Further, the volatility index (VIX) crossed the 30-mark on the expiry day of the February futures & options contracts.

A brutal sell-off was seen across the board with Bank, Auto, Financial Services, Metal, IT and Realty being the prominent losers, declining 5-7 percent.

The index has decisively broken its 200-day exponential moving average (which was placed at 16,881) and saw Long Black Day kind of pattern formation on the daily charts, indicating too much pessimism in the market. If the index breaks 16,000-15,900 zone in the coming session, then further steep correction can't be ruled out till the 15,500-mark, experts feel.

The selling pressure was more intense in broader market as the Nifty Midcap 100 and Smallcap 100 indices corrected 5.7 percent and 6.2 percent, respectively. As a result, the advance-decline ratio was significantly in favour of bears as more than 19 stocks corrected for every share rising on the NSE.

Also read - Taking Stock | Geopolitical tension roils market, indices see biggest single-day fall in nearly two years

Close

The volatility index jumped over 30 levels for the first time since June 2020, indicating a complete dominance of bears in the market. India VIX settled at 31.98, the highest closing level since June 17, 2020, rising 30.31 percent. Another reason for volatility was the expiry of monthly derivative contracts as traders closed the current month positions and rolled over to the next month.

The Nifty50 opened with a sharp cut at 16,549 (down more than 500 points) and extended correction in the afternoon trade to hit the day's low of 16,203, before closing with a massive loss of 815 points or 4.78 percent at 16,248, the lowest level since September 2, 2021.

"Weak Global cues appear to have spooked the Indian markets which resulted in a Long Black day kind of formation. Index also decisively closed below the 200-day exponential moving average," says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

Also read - Gainers & Losers: Five stocks that moved the most on February 24

In the next session, the market experts feels if the weakness persists below 16,200 levels then index can slide down towards 15,900 levels and beyond that 15,500 cannot be ruled out. "However, with today's sell off market reached deeply oversold levels. Therefore, in next session if Nifty opens negatively and slide into the zone of 16,000 to 15,900 levels then chances of a pullback attempt remain higher."

For time being rallies into the zone of 16,700 – 16,800 will remain vulnerable for a sell-off and strength in the index shall not be expected unless it registers a sustainable close above 16,700 levels, says Mazhar Mohammad who advised traders to remain neutral till more clarity emerges.

Also read - Ukraine-Russia war-led collapse | 10 stocks hitting lower circuit for every scrip at upper circuit

On option front, maximum Call open interest was seen at 17,000 then 17,500 strike while maximum Put open interest was seen at 16,500 then 16,000 strike. Marginal Call writing was seen at 16,500 then 16,700 strike while marginal Put writing was seen at 15,500 then 16,000 strike.

The above option data indicated that the Nifty could be seen in a wider trading range of 15,500 to 17,000 zone due to higher volatility.

Positive setup was seen only in IndiaMART, Hindalco and United Spirits while weakness was seen in Indus Towers, PNB, Amara Raja Batteries, InterGlobe Aviation, BHEL, RBL Bank, Tata Motors, Godrej Properties, SAIL, MCX, LIC Housing Finance, IRCTC, Ashok Leyland, Tata Chemicals, Shriram Transport Finance, Mahanagar Gas, Motherson Sumi, Sun TV Network, Indian Energy Exchange etc, says Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Also read - Sensex sees 10th biggest market crash in history as Russia invades Ukraine

Bank Nifty opened gap down at 36,085 in line with the pressure in the broader market and nosedived towards 35,000 levels. The entire market witnessed a bloodbath and the banking index closed with massive losses of 2,164 points at 35,228, forming large bearish candle on the daily charts.

"Now, till it remains below 35,500 levels, weakness could continue for the downside move towards 34,000 and 33,500 whereas hurdles are seen at 35,750 and 36,500 levels," says Chandan Taparia.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



Download your money calendar for 2022-23 here and keep your dates with your moneybox, investments, taxes

Sunil Shankar Matkar
first published: Feb 24, 2022 05:30 pm
Sections
ISO 27001 - BSI Assurance Mark